LM Funding America, Inc.

Good day and thank you for standing by. Welcome to the LM Funding America's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cody Fletcher, Investor Relations. Please go ahead, sir.

Thank you, Operator, and thank you all for joining LM Funding America's first quarter 2026 earnings conference call. Joining us today are Chairman and Chief Executive Officer Bruce Rogers, Chief Financial Officer Richard Russell, and President of U.S. Digital Mining, Ryan Durant. An accompanying supplemental investor presentation has been posted under the Events section of our Investor Relations website. Before we begin, please note that today's remarks may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. We will also reference certain non-GAAP financial measures. Please refer to our Form 10-Q for a full reconciliation of these measures to the most comparable GAAP measures and to our SEC filings and the investor section of our website at lmfunding.com backslash investors for a more comprehensive discussion of these and other risks. I will now turn the call over to our chairman and CEO, Bruce Rogers. Bruce.

Thank you, Cody, and good morning, everyone. The first quarter of 2026 saw us continue to grow and improve our operations in a softer Bitcoin environment. Since completing our site integrations in 2025, our focus has shifted to running our vertically integrated platform at scale. We mined 26.1 Bitcoin during the quarter, an increase from 22 Bitcoin in the fourth quarter of 2025. We did this with higher energized hash rate and continued improvements in fleet efficiency. In March, energized hash rate reached approximately 790 petahash, the highest level in the company's history. and the month delivered 9.6 Bitcoin of production, our strongest of the quarter. On March 31, 2026, our 338.2 Bitcoin treasury was valued at approximately $23.1 million. With the recovery in Bitcoin price since quarter end, our 334 Bitcoin treasury on April 30th was valued at approximately $25.3 million. and approximately $27.3 million as of earlier this week. Despite this trend, our market capitalization continues to trade at a material discount to the value of our Bitcoin holdings alone. While Bitcoin price weakness is driving the reported financial results, the underlying operating profile improved across every relevant measure. Bitcoin produced, energized hash rate, lead efficiency, and uptime. The first quarter of 2026 represents the first full period in which the platform we assembled in 2025 has operated at scale, and we are very happy with the numbers being produced. I'll now turn the call over to the President of U.S. Digital Mining, Ryan Duran. Ryan?

Thank you, Bruce. The first quarter of 2026 was the first full period during which our expanded fleet operated at scale across both sites. We produced 26.1 Bitcoin, an increase of 19% over the fourth quarter, while energized hash rate grew from approximately 750 petahash at year end to approximately 790 petahash at quarter end, the highest in company's history. In January, we energized our second BC40 Elite immersion cooled unit at Oklahoma, adding approximately 35 petahash via 160 Bitmain S21 immersion miners. The same month, Winter Storm Fern gave us an opportunity to demonstrate the value of our grid relationships. We proactively curtailed mining operations and redirected power to the grid, generating approximately $305,000 in energy and curtailment revenue in January, with the majority earned in just three days during the storm, equivalent to roughly four Bitcoins. In late February, we deployed approximately 300 Bitmain S19 XP miners at Oklahoma, replacing older hardware and reallocating higher TerraHash units to Mississippi. The upgrade lifted February production to 8.7 Bitcoin. March closed the quarter at 9.6 Bitcoin, our highest monthly output and highest hash rate on record. As we move into the second quarter, we are mindful of the seasonal headwinds that warmer temperatures bring to mining efficiency and output. We look to continue incremental fleet upgrades where opportunities present themselves with the goal of partially offsetting those effects and maintaining the competitive position we have built through the first quarter. Looking at the fleet more broadly, the competitive economics of our hardware are better than the market typically appreciates. ASIC efficiency gains have compressed materially across recent generations. Early generational leaps, S9 to S17, S17 to S19, delivered efficiency improvements of 30% to 55%. The last two air-cooled generations have produced gains in the 18% to 23% range, modest by historical standards. The driver is structural. Leading semiconductor foundries are allocating an increased share of advanced manufacturing capacity to AI chip production, extending ASIC lead times and compressing efficiency improvements across the Bitcoin supply chain. The practical result is that our deployed S19 XP S21 and S21 immersion fleet retains its competitive position on the network meaningfully longer than the same generational hardware that would have in prior cycles, a dynamic we expect to persist. I will turn the call over to Rick.

Thank you, Ryan. Total revenue for the first quarter of 2026 was approximately $2.1 million. Compared with $2.4 million in the fourth quarter of 2025, and $2.4 million in the first quarter of 2025. A year-over-year decline of approximately 11%. The decrease reflects a significantly lower Bitcoin price, but partially offset by a 19% sequential increase in Bitcoin produced. Mining margin was approximately 24.1% in the first quarter of 2026, compared to 25% reported in the fourth quarter of 2025. Mining margin in the quarter was supported by approximately $368,000 in curtailment in energy sales recognized as a reduction of cost of revenues set against an average Bitcoin price that declined from an average of $99,700 in the fourth quarter of 2025 as compared to an average of $75,700 in the first quarter of 2026. The net loss for the first quarter of 2026 was approximately $10.1 million, and the core EBITDA loss was approximately $8.4 million, compared with a Q1 2025 net loss of $5.4 million and core EBITDA loss of $2.8 million. Net loss in the first quarter of 2026 reflects a $7 million negative fair market value adjustment on both mined digital assets and Bitcoin receivable since the Bitcoin price declined from approximately $87,500 at year-end to approximately $68,300 on March 31, 2026. The company's net adjusted cash flow used in operations was approximately $200,000 after adding back the $3.1 million of proceeds from the sale of digital assets to the $3.3 million of net cash used in operating activities. On March 31st, 2026, total assets were approximately $41.8 million, including Bitcoin holders of 338.2 Bitcoin, of which 174 Bitcoin are held by Galaxy Digital as collateral. The total value of all Bitcoin was approximately $23.1 million in cash of approximately $800,000. Total liabilities were approximately $22.7 million, essentially flat for the year-end 2025, consisting primarily of the $10.9 million of the Galaxy Digital Master Digital Currency Loan and approximately $8.7 million of other notes payable, of which $1.9 million is long-term. During the first quarter, we extended the maturity date of the Galaxy facility to June 26, 2026, providing flexibility to evaluate settlement options as Bitcoin market conditions evolve. As a subsequent event update, the underlying value of our Bitcoin treasury has recovered significantly since the close of the quarter. As I noted previously, our March 31st Bitcoin treasury was valued at approximately $23.1 million, or $1.06 per share. On April 30th, 2026, we held 334 bitcoins, including the 174 bitcoins held by Galaxy Digital's collateral, totally valued at approximately $25.3 million, or $1.18 per share, at a bitcoin price of approximately $75,800. As of May 11th, that treasury was valued at approximately $27.3 million, or $1.27 per dilute share at a Bitcoin price of approximately $81,700. The approximately 21% Bitcoin price recovery since March 31st represents roughly $5 million of incremental Bitcoin fair value across our holding. Because the substantial majority of our reported key one net loss is like a non-cash Bitcoin fair value adjustment, applying the May 11th Bitcoin price to our March 31st 31st balance sheet on a pro forma basis would reduce our reported key one net loss by a comparable amount. The implied per share value of our Bitcoin treasury held on April 30th, 2026 but valued at the May 11th price now stands at approximately $1.27, well above our recent share price and a direct measure of the valuation disconnect we continue to work to close. Looking through the non-cash fair value adjustments, the underlying operating profile remains consistent with the fourth quarter. Stable mining margin, higher Bitcoin produced, and manageable balance sheet. The operating leverage embedded in our two wholly owned low-cost power sites translate directly to margin and cash flow expansion in any Bitcoin price recovery. I will now turn the call back to Bruce. Thank you, Rick.

Let me close with four points. First, the company is operationally in the strongest position in its history. Record energized hash rate, record monthly production in March, and two wholly owned sites running at scale. Second, during the quarter, we again extended the Galaxy Digital Facility maturity, this time to June 26, 2026. This helps further preserve our capital structure flexibility of our Bitcoin asset base. Third, our common equity continues to trade at a material discount to the underlying value of our Bitcoin treasury and the value of our operating platform. Closing that valuation gap remains a primary focus. Managing the things we can control like disciplined operating execution, consistent communication with shareholders, and selective accretive growth. Fourth, and the point of which I'd like to close, we remain a focused Bitcoin mining and treasury company. We plan to acquire and mine Bitcoin with low-cost power that presently does not suit HPC or AI compute demands, but may in the future as the profile of those demands evolve. We continue to evaluate selective expansion in the 5 to 20 megawatt range, including additional capacity in Mississippi. These are assets that fall below the scale threshold required for hyperscaler hosting and appear to be increasingly available at relatively attractive prices in both power and acquisition costs. That positioning is reinforced by the broader market backdrop. Bitcoin network hash rate has declined approximately 27% from its October 25 peak as public miners reallocate capacity to AI hosting. Five downward difficulty adjustments have been recorded year to date. Public miners sold a record 32,000 Bitcoin in the first quarter alone to fund the GPU capital expenditure required for those AI build-outs. And more than $70 billion of HPC contracts have been announced across the sector. Each megawatt of mining capacity that exits the network for an AI workload is a megawatt of reduced difficulty for those of us mining Bitcoin. We view these dynamics as structural rather than cyclical, driven by foundry capacity allocation, accelerating hyperscaler power demand, and the persistent spread between the available power costs and the Bitcoin mining revenue per megawatt. We believe the economic logic favors operators of our profile. Our priorities for the remainder 2026 are unchanged. Grow Bitcoin production, improve fleet efficiency, increase Bitcoin per share, and evaluate accretive acquisitions in the 5 to 20 megawatt range with the same value discipline that produced the Mississippi acquisition. Thank you for your continued support. Operator, please open the line for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. withdraw your question please press star 1 1 again one moment for our first question and our first question is going to come from the line of matthew galinko with maxim group your line is open please go ahead hey good morning thanks for taking my questions um maybe firstly

Given your comments about the impression of efficiency gains across ASIC generations more recently, how does that shape your thinking about adding hash rate to, you know, if you do acquire an additional site or do you look for fleet optimization? Are you, you know, still looking for new ASICs or would, you know, would you purchase, use, you know, older generations?

It is all driven by electricity tariffs and price and what can you buy the electricity for. With the right electricity price, then you decide what sort of machines work best there and whether it's going to be air-cooled or immersion, et cetera. Our driving force is always payback time. So that means the sooner that that machine mining at a constant price with constant electricity can pay for itself and be in the black, then that's what we want. And so that's taking us into the used market or the second from the vastest generation area of machines because it's just where the TerraHash payoff and the revenues pay off for us.

Got it. And then I guess, you know, you touched on continuing to evaluate sites in the 5 to 20-ish megawatt range. Can you maybe talk a little bit more about what you've seen over the last quarter as far as, you know, counterparty expectations for, you know, what those costs, did they come down at all? Have you seen more entering the pipeline? Is there more evaluation going on today than, you know, a couple quarters ago? Just a little bit more color on that side. Thanks.

So the pipeline gets to be pretty robust because people that have a wire going over their land all assume that they are sitting on HPC or bitmine gold. And then, you know, you do the due diligence and find out what that wire can carry and where the nearest transformers and substations are, and things fall apart quickly. Even when you find the electricity there, then you've got the Bitcoin mining, the environmental issues, you know, the noise issue, the heat, where is it going to go? are you really going to be able to scale an operation on that site with a residential neighborhood or a church or a school nearby, that kind of thing. So it's all of those things that drive you to where you can go. And then you ask about pricing. I think our Mississippi transaction sort of sizes it up. People that are exiting Bitcoin to go to HPC and greater things, kind of start off with what their cost basis is plus something in terms of what they're hoping to realize. But it's kind of a buyer's market out there for these 5 to 20 megawatt sites. There's only a few of us left in this microcap land where you can do that kind of thing. So that's probably the explanation of why there's less velocity so far this year on those type of acquisitions than we would have thought.

Thanks. I'll jump back in the queue.

Thank you. Showing there's no further questions, this concludes ML Funding America's first quarter 2026 earnings conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.